H E C T O R M E D I N A G L O B AL M B A C O M M E N C E M E N T AD D R E S S Scottsdale, AZ, July 21, 2006

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1 H E C T O R M E D I N A G L O B AL M B A C O M M E N C E M E N T AD D R E S S Scottsdale, AZ, July 21, 2006 Thank you very much for your kind words, Rafael. President Cabrera, Thunderbird and Tec de Monterrey Faculty, Family and Friends of the 2006 Global MBA Graduating Class, Ladies and Gentlemen, Good morning to you all. Dear Graduates, I am truly honored to have been asked to address you at your commencement ceremony. This is a day to remember for you, I am sure, and I will always appreciate the opportunity that you have given me of sharing it with you. That is why, for me, this is also a day to remember. Many months ago, you made a very important choice in your personal development. Let me say that by choosing this great Global MBA program, you have taken a step in the right direction. Globalization is a force that is already affecting your lives and the lives of all of us, and will continue to do so in many important ways. So CONGRATULATIONS, for having made the right choice, and for having completed this important stage. I am passionate about education, and I am very happy to see you achieving a new goal in your professional and personal lives. 1

2 I believe in the transformational power of education, and I know that you are eager to start applying all the knowledge you have gained. And you must also be eager to start celebrating. I hope to contribute to your celebration by sharing some reflections with you. I would like to offer you my reflections on three ideas that in my view are interconnected, and are definitely connected with the world we all live in today. The first one is about the evolution of the business environment, the second is the importance of discipline, and the third one is about the responsibility that all of you will have to assume as MBA graduates. FIRST POINT - EVOLUTION Graduation ceremonies, like so many other things in life, are about ending a cycle, and starting a new one. Not so long ago, cycles seemed to be longer; business cycles in particular took some 40 to 60 years to run their full life. But the forces of "creative destruction" have increasingly shortened them. Constantly emerging technologies and many other factors are turning the old business cycle into a "change continuum." 2

3 In our fast-paced culture, the global business environment is not only changing, but actually evolving at an unprecedented speed. People, organizations and entities like the markets, tend to prefer the certainty provided by stability. Organizations used to be designed to support rigid, hierarchical structures, strictly defined corporate cultures, and proven business models. However, consumers are always looking for the next new thing; for unique products, custom-tailored services and maximum value, as well as for new ways of getting all of them. With the breakdown of time and distance resulting from technological progress; new trade mechanisms; a growing pool of low-cost, high-skilled talent from countries like China or India; and lower barriers of entry in practically every industry, rigidity often means disappearing from the business map. This means that, if change was difficult to manage in a traditional business environment, it pales in comparison to successfully managing constant business evolution. However, that is precisely what you'll have to do very soon, because longterm success is no longer measured by how quickly you can propel your organization to the top, but by how long you can foster its constant evolution to stay at the top. 3

4 In fact, it could be argued that the ability to evolve is becoming the key competitive advantage in an increasingly dynamic environment. Every day we witness examples of how this reality is sinking in. I'm sure many of you read the essay that Sam Palmisano, the CEO of IBM, published recently in the journal Foreign Affairs, on the evolution of the so-called "multinational corporation" into a new "globally integrated enterprise." He describes it as a "company that fashions its strategy, its management, and its operations in pursuit of a new goal: the integration of production and value delivery worldwide." Regardless of size, country of origin, or industry, we're seeing old and many new players incorporating companies in countries with the most favorable tax regimes, while they raise venture capital in places with abundant liquidity and a strong rule of law. We see them conducting research where the best technicians and scientists are; manufacturing or assembling their products in low-cost sites; shipping their goods anywhere overnight, and providing services in real-time through the Internet. Small and large companies alike have more choices than ever to choose what they want to do, how they want to do it, where they want to do it, and with whom they want to do it. 4

5 In this evolutionary process, the purpose of the company is being redefined. Running always the risk of losing its focus. Demographic changes with aging populations in most advanced economies and a growing number of working-age people in emerging markets will determine many decisions, from immigration policies to attract high-skilled workers, to outsourcing backoffice, R&D and many other high value-added processes. The rising demand for personalized products and services is another factor to consider, as the ability to tap global resources allows more firms to match their customers' individual requirements. But perhaps the most significant trend is the growing importance of personal relations as the cornerstone of competitiveness, and evolution. Having a sound business model is indispensable. Investing wisely on the right technology, and knowing how to make the best of it, can help. you stay one step ahead of the competition. Establishing an efficient supply-chain can make the difference between being right on time, and being out of business. But the effectiveness of these processes, and their evolution, depends on the single, most important asset of any organization: its people. 5

6 Business evolution depends on you, and on your ability to manage good personal relations in an age of flat, fast-paced, and constantly evolving organizations. Naturally, managing this new workforce, the knowledge workforce as it has been called, requires a new set of organizational tools and a new frame of mind. And that is where you come into the picture. SECOND POINT - DISCIPLINE Globalization has an impact on everyone. Governments, companies, NGO's / and certainly people i are all affected by it, even to the point where in many cases becomes a question of sheer survival. In the age of instant communications and virtual reality, we have an incredible amount of information, resources and tools at our disposal. All this can help us to do a better job, but it also can be extremely distracting. And the difference between making globalization work to your advantage, and being swept away by it, is the second thing that I mentioned at the beginning: discipline. Your understanding of the evolving business environment, all the things you've just learned, the network of new contacts that you've made will be essential to your success. 6

7 But in my personal experience, discipline lies at the very heart of any long-lasting achievement. Both at the organizational and individual levels, discipline is the guiding principle that allows a company and a person to stay focused on achieving the desired results. Discipline in how you go about your daily responsibilities; in how you organize teams formed by people who could be thousands of miles away scattered around the world. Discipline in how you manage your time to cope with the new multitasking and continuous partial attention syndromes; discipline in how you balance your professional and personal lives. In this world of constant and fast evolution, it is very easy to lose focus. There are so many alternatives, so many things a person or a company can do. I have seen organizations, and people, wasting their resources, losing their focus by the lack of discipline. But I have also seen the value created by women and men, and organizations, that once they set a clear path, call it vision, strategy, whatever you will, follow it with great determination and discipline. THIRD POINT - RESPONSIBILITY This takes me to the third point that I want to make today, which is the responsibility all of you will have to assume as MBA graduates. 7

8 I almost gave in to the temptation of appearing nice to you and tell you that after earning your MBA everything was going to be much easier. But I know you are wiser now and you can see thru me. You know that now, everyone expects a lot more from you. Everyone expects you to lead, that is now your responsibility! To say that each of you will have to lead by example is an understatement. Leading is a demanding task, and you will have to prove yourselves, day in and day out. After a well-deserved mini-break, when you hit the ground running in a few days, you'll begin the next cycle in your lives and you'll have to put everything you've learned to good use. But especially, you have the responsibility to show one of the traits that is expected from you: leadership. Leadership truly makes the difference in steering an organization through a process of constant evolution. Any company that is focused on continuous improvement needs to make sure that its employees update their skills constantly; that they renew their commitment to collaboration every day; and that their individual efforts are perfectly aligned with the overall corporate strategy and with specific business policies. 8

9 Change, and even more so, evolution, often implies trade-offs. Inevitably, this causes tension and other difficult situations, which can undermine the efforts of any organization. Your job as managers, and leaders, is to make sure that people understand and, more importantly, share the reasons that compel an organization to evolve, so that the benefits and losses caused by this dynamic become a source of motivation, and not of frustration. Let me be clear about one thing: leading is not about avoiding conflict, but about managing it in a positive way. In my experience, good leaders demand different perspectives from their teams, contrasting points of view and opinions, so that they can have a good look at the whole picture before making a decision. And once a decision is made, a good leader makes sure that those who deserve recognition get it, and that those who end up on the losing side of an argument get the respect that they deserve for defending their case and supporting the final choice. Leadership is not about ordering people to do anything, but about convincing people of doing what is best for the organization. And this goes well beyond the realm of business. You will have to exercise your leadership in everything that you do, because many people will be looking up to you. 9

10 You have a responsibility not only to your companies and businesses, but also to your communities and to your countries. As people who have enjoyed the advantages of higher education, you are in a position to understand the many challenges that our societies face, and more importantly, to do something about it. Most of you come from countries like my own, Mexico, where we are facing difficult choices in how we can move ahead to improve our economies, our political systems, and our peoples quality of life. There are many ways to go about the business of making our countries better, but all of them have one thing in common: citizen participation. The time when we thought that the role of government was to solve every problem that we could imagine is long gone. Many companies are taking a more proactive approach in contributing to the well-being of society, from helping people with different capacities, to being good stewards of our natural resources through conservation. This has been called corporate social responsibility. But call it what you will, the fact is that in our countries, citizens need to become much more involved in the evolution of our communities. We need to reinforce the bonds that unite us, and in this task your leadership will be greatly appreciated, because above all, leading is about making decisions. And let me tell you that there is no such thing as an easy decision. 10

11 So when the time comes for you to make a tough decision, I would ask you to keep in mind that, ultimately, everything you come to decide will have an impact on people, on actual human beings. Your fellow employees, your customers, your suppliers, your strategic partners, your investors, the people in the community where you work and live, your families, and yourselves are what really matters most. I hope that these brief reflections will be of value to you. And to help you remember them, let me summarize them in a phrase that connects the three ideas. You have the responsibility to be disciplined leaders in a rapidly evolving world. Now, I personally have all the confidence that you will perform! Let me close by reminding you that when this ceremony concludes, you will become Thunderbird and Tec de Monterrey alumni. Stay close to these great institutions and support them in the future, because they have given you much: they have given you what I hope are life-lasting friendships, and a renewed sense of belonging to an admirable community of wonderful people. Thank you again for the opportunity to be here with you today, and congratulations Global MBA Class of 2006! 11

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